Parent-Affiliate Coordination and Intra-firm Trade

Using unusually rich information on foreign affiliates in goods-producing and goods-selling industries of 19 countries in Sub-Saharan Africa in 2009, we provide novel evidence on positive associations of the importance of parent-to-affiliate (i.e., intra-firm) transfers of different types of tacit knowledge (e.g. technology and know-how) for coordination purposes with intra-firm transfers of material and service inputs and capital goods. These associations suggest that parental knowledge transfers are complementary to inputs and capital goods imported from the same source, ensuring their inter-operability. Also, we provide novel evidence on positive associations of the importance of parent-affiliate coordination in technology and know-how with the probability of foreign affiliates of assisting their local suppliers through technology and know-how transfers, as well as of intra-firm input sourcing with the likelihoods of foreign affiliates of assisting their local suppliers to upgrade their production efficiency and product quality. Taken together, we interpret our findings as suggestive evidence of upgrading of foreign affiliates --through parental transfers of knowledge, inputs and capital goods-- leading to upgrading of host-country firms acting as suppliers to them